Spirit Airlines Workers, Part 2: How a Severance Package Can Disqualify You from Chapter 7 — and What to Do About It

This is Part 2 of a working playbook for Spirit Airlines employees laid off after the May 2, 2026 shutdown. Part 1 covered the first 14 days — Florida Reemployment Assistance, COBRA versus marketplace coverage, WARN Act documentation, and the calendar of financial stress points. Read it first.

Part 2 is for the workers whose Part 1 question — do I need bankruptcy — got answered probably yes. The next question is harder: which chapter, when, and how does a severance package change the answer?

The honest version: a severance package can disqualify you from Chapter 7. And lacking ongoing wages can disqualify you from Chapter 13. Many laid-off Spirit workers will fall into a window between the two — too much income on paper to file Chapter 7, not enough income on paper to fund a Chapter 13 plan.

There are paths through. They depend on your household size and the size of the package. Here is the math.

The means test, in plain English

To file Chapter 7 under the U.S. Bankruptcy Code, your average household income for the six calendar months before filing must be at or below the Florida median income for your household size. If you are above the median, you must pass an additional means test calculation that examines your actual disposable income against IRS expense allowances. If you fail that, Chapter 7 is closed to you.

The six-month average is the trap. It counts every dollar that came in — wages, bonuses, commissions, severance — across the lookback period.

Florida median income — current figures (effective April 1, 2026)

Source: U.S. Trustee Program Median Income Table, effective April 1, 2026.

How severance breaks the math

Spirit's wage scales varied widely. A senior captain typically earned $250,000 to $400,000 a year. A senior flight attendant, $80,000 to $120,000. A ramp agent, $40,000 to $55,000. A corporate analyst at the Miramar headquarters, $70,000 to $130,000.

Some Spirit workers will receive severance under a separation agreement — typically several weeks to several months of base pay, sometimes with health-benefit continuation, sometimes lump-sum, sometimes paid out in installments. As of this post, Spirit has not publicly committed to a specific severance schedule, and unions are pushing the bankruptcy court to require full severance, back pay, and benefits for affected workers.

Here is how that severance interacts with the means test, using a worked example.

Worked example: senior flight attendant, household of two

• Household size: 2 (worker + spouse)
• Florida median for household of 2: $86,523 / year ≈ $7,210 / month
• Six-month lookback wages from Spirit (Nov 2025 – April 2026): $48,000 (i.e., $96,000/yr base × 6/12)
• Severance package received in May 2026: $24,000 lump sum (roughly 3 months base pay)

If the worker files Chapter 7 in June 2026, the six-month lookback (December 2025 – May 2026) captures:

• $48,000 in regular wages from Spirit
• • $24,000 severance lump sum
• = $72,000 total over six months

That's an annualized rate of $144,000 — well above the Florida median for a household of 2. Means test failed. Chapter 7 is presumptively unavailable.

If that same worker waits until December 2026 to file, the six-month lookback (June – November 2026) captures:

• $0 in Spirit wages (already laid off)
• $0 in severance (received outside the window)
• Some Florida Reemployment Assistance ($275/week × 12 weeks max = $3,300)
• Whatever new job income started in that window

That number could easily come in well below the median — making Chapter 7 available again.

Same worker. Same debts. Six months of timing changed the answer.

Chapter 13 has the opposite problem — it needs income

Chapter 13 lets you propose a 3- to 5-year repayment plan that protects your house, your car, and most of your property while you catch up on arrears and pay something to unsecured creditors. The automatic stay halts foreclosure, repossession, garnishment, and most collection.

Chapter 13's catch is in the name: repayment plan. The plan must be funded with regular income. Specifically, 11 U.S.C. § 109(e) requires the debtor to have regular income sufficient to make plan payments.

For a laid-off Spirit worker:

• No wages and no replacement income yet: Chapter 13 is not feasible. The Trustee will object to confirmation; the court will dismiss the plan.
• New job locked in but not started: depending on the offer letter, this can support confirmation. Talk to counsel about timing.
• Florida Reemployment Assistance only: $275/week generally cannot fund a Chapter 13 plan with meaningful arrears or unsecured creditor distribution. Possible only in narrow circumstances.
• Severance in installments + spousal income: can fund a plan if installments will continue through the plan period or spousal income is sufficient.

So the laid-off Spirit worker who would benefit from Chapter 13's automatic stay to halt foreclosure or repossession may find themselves temporarily ineligible for Chapter 13 while waiting for new employment. That is the catch-22.

The "income gap" — caught between two chapters

The hardest case is the worker who:

1. Made enough at Spirit (plus severance) to fail the Chapter 7 means test based on the six-month lookback, AND
2. Has not yet replaced that income, so cannot fund a Chapter 13 plan.

Five paths through this gap:

Path 1: Wait it out

The most common solution. File later.

• Each month that passes drops a high-income month off the lookback and adds a lower-income month.
• Six months after the last paycheck and the last severance dollar, the lookback often shows below the median — and Chapter 7 becomes available.
• During the wait, manage cash flow with FL Reemployment Assistance, marketplace health insurance, and creditor hardship programs.
• The trade-off: you carry the debt during the wait, and creditors may file lawsuits. Once a judgment lands, you may face wage garnishment that the eventual bankruptcy will undo — but only after filing.

Path 2: Pre-filing exemption planning

If you have non-exempt cash from severance, you have legitimate options to convert it into exempt property before filing — within the limits of bankruptcy law and ethics rules. Examples:

• Pay down the mortgage on your homestead. Florida's homestead exemption is unlimited in dollar amount (subject to acreage caps), so equity in your home is protected.
• Maximize retirement contributions to a 401(k) or IRA. Retirement accounts are generally fully exempt under Florida law and federal law.
• Pay legitimate household debts (auto loan, mortgage arrears, current property taxes).

This is not about hiding money or transferring assets to friends and family — those moves are bankruptcy fraud and they will unwind. It is about taking cash that is non-exempt and putting it where the law already allows you to keep it. Done correctly, with counsel, and disclosed properly, it is lawful pre-bankruptcy planning.

Path 3: File Chapter 7 above the median and pass on expenses

Failing the median test is not the end of Chapter 7. The full means test then runs: the law subtracts allowed expenses (IRS National Standards plus housing, transportation, taxes, insurance, secured debt payments, and certain priority obligations) from your monthly income. If the resulting disposable income is low enough, the presumption of abuse can be rebutted, and you may still file Chapter 7.

A Spirit worker with high mortgage payments, multiple car payments, dependent children, and high health-insurance premiums may pass on the expense side even when failing the median.

This calculation is fact-intensive. It is the reason a 30-minute consultation can be worth thousands of dollars.

Path 4: File Chapter 13 once new income lands

For workers who land at JetBlue, Allegiant, Sun Country, American, or any other replacement employer within the next 30 to 90 days:

• The new income — combined with any spousal income — can fund a Chapter 13 plan.
• The automatic stay protects the house and the cars during the plan period.
• The plan can include catching up mortgage arrears that accumulated during unemployment.
• Unsecured creditors receive whatever the means test calculation determines as your projected disposable income over the plan period.

For senior pilots and flight attendants, the South Florida airline market is hot enough that re-employment within 60 days is realistic. Chapter 13 may be the right tool once that new income is documented.

Path 5: Don't file at all

For some workers, the right answer is no bankruptcy. Reasons:

• The debt is mostly secured (mortgage, auto) and you can negotiate hardship modifications directly.
• The debt is mostly federal student loans (presumptively non-dischargeable) and an income-driven repayment plan switch is the better tool. See the federal student loan overhaul post.
• You expect rapid replacement income that closes the gap before creditors take legal action.
• Severance + savings + new job pipeline make the math survivable without a bankruptcy mark on your credit.

Bankruptcy is a tool. Like any tool, the wrong one in the wrong situation makes things worse.

The Spirit-specific overlay

A few patterns we expect to see in Broward, Miami-Dade, and Palm Beach over the next 90 days:

• Senior captains and first officers — often have the largest debts (jumbo mortgages on Coral Springs / Pembroke Pines / Plantation properties, multiple vehicles, kids in college). The means test math is brutal because of high recent income. Many will benefit from Path 1 (wait it out 4–6 months while looking for new flying work) combined with Path 2 (legitimate pre-filing planning).
• Senior flight attendants — often have moderate income, modest mortgages, and significant credit-card balances accumulated during periods of low pay. Chapter 7 will often be available within 4–6 months under Path 1.
• Ramp agents, gate agents, mechanics, dispatchers — typically below the median already; the means test will not be the obstacle. The obstacle is finding the cash flow to bridge until new employment.
• Miramar HQ corporate staff — wide range of incomes; analysis is fact-specific. Severance packages are likely to be larger than for line operations.
• Pilots' spouses — household-size and spousal-income matter. A spouse with a stable W-2 job changes both the means test math and the Chapter 13 funding analysis.

What the consultation should answer

If you are evaluating whether bankruptcy belongs in your 2026 plan after the Spirit shutdown, the consultation should produce specific answers to:

• What is your six-month lookback income today, and what will it be in 30, 60, 90, and 180 days?
• Where are you against the Florida median for your household size?
• If you fail the median, do you pass on the expense side?
• Do you have arrearages on a secured loan (mortgage, auto) that need a Chapter 13 stay?
• Is replacement income realistic in the relevant time frame?
• Are there legitimate pre-filing planning steps available?
• Are there non-bankruptcy alternatives (loan modification, IDR plan switch, hardship deferral) that fit better?

That is the conversation. The right answer is the one that fits your facts.

What to do this week

1. Read Part 1 if you have not. Florida Reemployment Assistance, COBRA decisions, and WARN Act documentation are time-sensitive and run independently of any bankruptcy decision.
2. Pull the documents. Six months of paystubs, severance offer (if any), tax returns for 2024 and 2025, mortgage and auto statements, credit card and medical-debt summaries.
3. Calculate your six-month lookback. This is the single most important number for the bankruptcy analysis. If you are within 10–15% of the median for your household size, the timing question becomes the central question.
4. Schedule a consultation before you make any of the following decisions: signing a severance agreement, accepting or declining a settlement offer from a creditor, taking a 401(k) hardship distribution, or paying a large credit card balance with savings.
5. Do not transfer assets to family members or friends in anticipation of filing. That is bankruptcy fraud. It will unwind. Do this kind of planning with counsel, on the record, lawfully.

For the broader thought-leadership context across student loans and consumer debt, see stevenfraser.com. For DC consumer-protection issues, see DCDebtRelief.com.

If you are a Spirit Airlines worker in Broward, Miami-Dade, or Palm Beach County and want a confidential conversation about whether your situation calls for Chapter 7 now, Chapter 13 in 60 days, pre-filing planning, or no bankruptcy at all, free consultations remain available to affected workers.

Schedule a confidential consultation or call 954-451-0434 (Florida) or 877-862-7188 (Toll-Free).

Steven C. Fraser, Esq. — FL Bar No. 625825 · DC Bar No. 460026 · Admitted M.D. Fla. · N.D. Fla. · S.D. Fla. · D.D.C.

This post summarizes publicly available information about Florida bankruptcy practice and the 2026 Spirit Airlines shutdown. It does not constitute legal advice as to any specific situation. Please contact our office for a confidential consultation tailored to your facts.